Horizons & Co: Significant changes to regulatory framework governing restructuring and insolvency in 2024

Horizons & Co: Significant changes to regulatory framework governing restructuring and insolvency in 2024

Ali Al Zarooni, Managing Partner, Horizons & Co

On October 31, 2023, the UAE published the new Federal Law Decree No. 51 of 2023 on Financial Restructuring and Bankruptcy (“New Law”) in the Federal Gazette, effective from May 1, 2024. This law supersedes the 2016 Bankruptcy Law, but existing regulations will remain until new ones are introduced.

Areen Jayousi, Partner, Horizons & Co

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The New Law introduces significant changes, particularly the replacement of the Preventive Composition tool with a more flexible Preventive Settlement mechanism. This court-supervised process allows debtors to continue operations and negotiate settlements with creditors without appointing a trustee, alongside a 3 to 6-month moratorium.

Updated definitions in the New Law, such as debtor’s assets, now encompass all properties owned by the debtor, both locally and internationally. Additionally, the law allows for the appointment of experts and auditors by the judiciary to assist the Bankruptcy Court, with their fees covered by the judiciary’s budget.

Significant is the introduction of the Bankruptcy Unit, a specialised division within the Courts, to oversee bankruptcy and restructuring cases. This unit will process requests, notify parties of court decisions, and ensure compliance with legal requirements. The Financial Restructuring Committee’s (FRC) role is also